TRADE DISCOUNT Meaning and
Definition
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A trade discount refers to a reduction in the price of goods or services offered by a manufacturer or wholesaler to a retailer or another intermediary involved in the distribution chain. It is commonly used as a promotional strategy to incentivize retailers and encourage them to purchase products in bulk quantities. Trade discounts are primarily applied in business-to-business (B2B) transactions, aiming to facilitate sales and maintain strong relationships between suppliers and intermediaries.
The trade discount is typically expressed as a percentage, for instance, a retailer may be offered a 10% trade discount by a wholesaler on the listed price of products. This allows the retailer to sell the goods at a reduced price to consumers, subsequently increasing sales potential and attracting more customers due to the lower cost. The trade discount is often based on the volume or value of goods purchased, incentivizing wholesalers and manufacturers to offer more significant reductions on larger orders.
Trade discounts differ from other types of discounts, such as cash discounts, which are given for prompt payment or early settlement of invoices. Unlike cash discounts, trade discounts are exclusively exclusive to business entities within the distribution chain. Retail customers usually do not benefit directly from trade discounts, unless they are members of a cooperative or belong to a specific trade organization.
Ultimately, trade discounts play a vital role in stimulating sales, establishing long-term partnerships, and maintaining competitive pricing within the business-to-business marketplace.
Common Misspellings for TRADE DISCOUNT
- rrade discount
- frade discount
- grade discount
- yrade discount
- 6rade discount
- 5rade discount
- teade discount
- tdade discount
- tfade discount
- ttade discount
- t5ade discount
- t4ade discount
- trzde discount
- trsde discount
- trwde discount
- trqde discount
- trase discount
- traxe discount
- trace discount
Etymology of TRADE DISCOUNT
The word "trade discount" originated from the Old French word "descompte", which is a derivative of the Latin word "discomputare". "Discomputare" is a combination of the prefix "dis-" meaning "away" or "apart" and the verb "computare" meaning "to reckon" or "to calculate". In the context of trade, "discomputare" referred to the reduction or deduction from the original price during a transaction. Over time, this term evolved into the modern "discount", which is commonly used to describe reductions in price offered to customers, especially in trade or commerce.
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